Shares continue fall after Friday’s small rally

Shares dropped on Monday, after a slight rebound in the previous session, amid a worsening trade dispute between the world’s two largest economies, which may now be on the verge of an all-out trade war.

The local currency fell sharply to the lowest level in more than two years against the dollar.

The benchmark Kospi plunged 29.03 points, or 1.38 percent, to close at 2,079.01, the lowest since January 14, 2019, when the comparable figure was 2,064.52 points.

Local shares extended their losses throughout the session after opening significantly lower, losing 0.83 percent in the first 15 minutes of trading.

The sharp drop follows increased uncertainties created by the trade row between the United States and China, Korea’s two largest trade partners.

U.S. President Donald Trump increased the import tariff on $200 billion of Chinese goods to 25 percent, from 10 percent, on Friday. China threatened it will retaliate.

“The drop in the won-dollar exchange rate is leading to an outflow of foreign funds, while renewed concerns over the U.S.-China trade dispute also dampened investor sentiment,” said Seo Sang-young, a researcher at Kiwoom Securities.

Institutional investors offloaded around 130 billion won worth of shares, while foreign investors sold a net 138 billion won.